Three communities belonging to Dallas-based senior living provider Christian Care Communities and Services (CCC&S) will soon have a new owner months after the organization filed for bankruptcy.
A stalking horse bidder was already lined up for a bankruptcy sale in May, with an initial bid starting at $45 million for communities Mesquite, Allen and Forth Worth, Texas totaling 760 units. A stalking horse sale is an initial bid on assets of a bankrupt entity that effectively establishes a low-end bidding floor so that bidders can’t underbid the purchase price.
The first bid was made by North Texas Benevolent Holdings, a venture owned by the McFarlin Group of Dallas.Unless McFarlin is out-bid, the company will assume ownership of the communities, with affiliates of Boncrest Resource Group managing them. But the bankruptcy auction, slated for July 12, has received interest from multiple potential buyers, as reported first in the Dallas Morning News.
The move to acquire the three communities is part of an effort from McFarlin Group to acquire distressed or undercapitalized senior living assets across the country, according to Managing Director Matt Johnson., The company recently purchased four memory care communities in the Houston, Texas area.
“We’re currently active in the markets trying to find those properties where we can come in and buy the properties and close quickly,” Johnson told Senior Housing News. “Our strategy is to hold for four to five years, aggregate into one or more portfolios and exit.”
CCC&S’ total estimated assets and liabilities include between about $50 million and $100 million, with outstanding municipal bonds totaling about $50 million, according to its May bankruptcy court filing.
The pandemic led to a “significant decline” in occupancy at the company’s three communities, while at the same time “market forces limited the ability to raise revenues from resident rent to match these increased liabilities,” the original filing reads.
Last year, credit ratings agency Fitch Ratings downgraded CCC&S to a D rating after it failed to pay principal payments on its bonds that were due the previous month.
“Decreases in fundraising contributions also meant donations were not sufficient to defray the shortfall,” the initial bankruptcy filing continued. “Based on extensive financial analysis and other due diligence, the debtors have determined it is in the best interest of their estates, their residents, and the future of their communities to sell substantially all of their assets.”
Christian Care Centers is not the only senior living organization that has filed for bankruptcy as a result of Covid-19 challenges.
In May, Dallas-based CCRC Edgemere filed for 11 bankruptcy after grappling with financial challenges related to the pandemic. The community is owned by Iowa-based Lifespace, which affiliated with Texas-based Senior Quality Lifestyles Corporation (SQLC) in 2019.
Another Texas-area CCRC, The Buckingham, also filed for chapter 11 bankruptcy protections in 2021 following challenges faced since a deadly hurricane in 2017 and the pandemic.
And in April, a court OKed a Chapter 11 bankruptcy plan for American Eagle Delaware Holding Company and its subsidiary Eagle Senior Living.
Senior living communities represented the largest portion of delinquencies reported by municipal bond issuers in the first quarter of 2022, showing it is “was the most poorly positioned sector to withstand the pandemic,” according to an April 15 report by Moody’s Investors Service.